My Lords, I beg to move that these regulations, which were laid before the House on 29 June 2022, be approved. This Government have taken decisive action to support people with their energy bills. From 1 October a typical household in the UK will pay no more than £2,500 a year on their energy bill for the next two years. This is in addition to the £37 billion of support announced earlier this year, including the energy bills support scheme that provides a £400 discount for around 29 million households. The warm home discount complements these measures, focusing on those at risk of fuel poverty, primarily through the provision of a £150 direct energy bill rebate.
We have already passed legislation for the extension, expansion and reform of the warm home discount scheme in England and Wales, with better targeted and automated rebate provision. The Scottish Government have devolved powers under the Scotland Act 2016 to design and implement a warm home discount scheme in Scotland. The BEIS Secretary of State has certain reserved powers, including approving any scheme for Scotland. Earlier this year, Scottish Ministers requested that the UK Government make provisions for a continuation of the scheme in Scotland. In May, the UK Government consulted on this continuation and expansion of the scheme in Scotland, which was supported by a majority of respondents.
This SI extends the WHD scheme in Scotland to 2025-26, providing much-needed certainty on energy bill support to low-income and vulnerable households in Scotland. The Government committed to expanding the scheme in the energy White Paper 2020. The £475 million —at 2020 prices—spending envelope is set for Great Britain and will be approximately £506 million in 2022 prices. The warm home discount in Scotland will increase proportionately in line with the GB-wide increase to the scheme. The UK Government will apportion 9.4% of the total spending to Scotland; this means £49 million of the overall scheme value, an increase of around £13 million compared with last year.
Overall, around 280,000 Scottish households in or at risk of fuel poverty will receive a rebate this winter, which is 50,000 more households than last winter. The apportionment of spending to Scotland is based on the number of domestic gas and electricity meters across Great Britain and ensures that the costs of the scheme are spread evenly across all customers. As a result, the proportion of spending in Scotland will exceed Scotland’s share of the Great Britain population.
The scheme participation threshold for energy suppliers is lowered to 50,000 domestic customer accounts in 2022-23 and to 1,000 domestic customer accounts from 2023-24. This mirrors the scheme in England and Wales, and will mean that from 2023-24, suppliers obligated under the scheme will cover over 99% of domestic customers.
As requested by Scottish Ministers, the WHD scheme in Scotland will be a continuation of the scheme previously in place across Great Britain in 2021-22 and therefore will continue to include three main components: the core group, the broader group and Industry Initiatives. First, under the core group element
of the scheme, around 90,000 low-income pensioners in receipt of pension credit guarantee will continue to receive their rebates automatically. Secondly, under the broader group element, around 190,000 low-income and vulnerable households, mainly of working age, will receive a rebate following an application to their energy supplier. The broader group is expanded to include housing benefit as one of the mandatory eligibility criteria, as per the England and Wales scheme. Income thresholds for the criteria relating to child tax credits and universal credit are increased.
Each energy supplier’s obligations under the scheme will be set according to their market share in Great Britain. This is the fairest way of spreading costs across all customers in Great Britain and will ensure consistency across the two warm home discount schemes.
The Government recognise that there are differences in the proportions of energy customers that suppliers have in the different nations. There will be different challenges for suppliers with a higher proportion of customers in Scotland and those with a lower proportion. We are making allowances for these differences by allowing suppliers with few broader group customers in Scotland to transfer up to 100% of their broader group target to Industry Initiatives, which of course will be subject to Ofgem’s approval. Ofgem’s approval will mainly be based on each supplier’s market share in Scotland relative to Great Britain. Only energy suppliers with a disproportionally low number of broader group customers are likely to be permitted this flexibility.
Scottish households in or at risk of fuel poverty will continue to benefit from support under Industry Initiatives funded under the warm home discount. This element of the scheme will continue to provide valuable support to households, such as energy advice, benefit entitlement checks, energy debt and emergency financial assistance, as well as energy efficiency measures. We increased the cap on spending on Industry Initiatives to £7 million per annum, which is broadly proportionate to the spending expected in England and Wales in 2025-26.
Although activities permitted under Industry Initiatives will be the same as in previous years, there will be some exceptions. Part of the permitted Industry Initiatives spending on debt write-off is ring-fenced for customers with pre-payment meters, as these customers are particularly at risk of self-disconnection. Again, this mirrors the scheme in England and Wales. As per the scheme in England and Wales, limits are imposed on boiler and central heating system installations supported under Industry Initiatives, which will help to support our decarbonisation objectives.
No caps have been imposed on the amount of Industry Initiatives spending that can be used for financial assistance. The list of eligibility criteria for financial assistance has been expanded to include the mandatory eligibility criteria for the broader group. This will include suppliers whose broader group is oversubscribed to direct customers to financial assistance under these Industry Initiatives.
In conclusion, the warm home discount remains a source of critical support for low-income households across Great Britain. These regulations extend the scheme in Scotland until 2026 and increase energy bill support from £140 to £150 for over 280,000 low-income and vulnerable households each winter, when they
need it most. This is an additional 50,000 households receiving vital support compared with last year. Therefore, I commend these regulations to the Committee.
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